Swiss fine watchmakers to raise prices after franc increase

The 25th International fine watchmaking fair, attended by 16 luxury watch brands, opened its doors on Monday (January 19) in Geneva, four days after the Swiss National Bank (SNB) unexpectedly announced it had decided to scrap its three-year old cap on the Swiss franc, triggering the currency to soar against the euro.

In the felted alleys of the fair, and on the exhibition stands, the issue was on everyone's lips. Most fine watchmaking brands are based in Switzerland, and the bulk of their cost base is also in Switzerland.

Since last Thursday (January 15) the watches they sell in the euro zone now cost 15 to 20% more to produce. For the moment the watchmakers say they are waiting to see what will happen in the coming days and weeks.

CEO Francois-Henry Bennahmias of independent Swiss watchmaker Audemars Piguet was clear that prices would have to be adapted with a likely increase in Europe.

"We will have to adapt our prices to the decision that will be made in the coming weeks, we cannot make a decision overnight obviously, we have to wait and see what's going to happen, but, yes, at one point, we'll have to adjust prices, one way or the other, in Europe, obviously, prices will go up", said Bennahmias.

However, no wind of panic blew on the fair. The euro zone represents between 30 to 40% of their selling market, while the United States, South America and Asia remain promising and growing markets, even though demand has decreased a little lately in China.

Swiss watchmaker Parmigiani's CEO Jean-Marc Jacot, agreed that the sector can absorb the shock, and decrease margins to adjust to the new deal. The situation will benefit his retailers in the euro zone, although he expects it to be problematic only for its subsidiaries which sell in Swiss Francs. For the moment, he has decided to wait for a while before potentially adjusting his prices, and doesn't think it could damage his industry or threaten employment.

"We could not continue like that, we could not continue in Switzerland, to live under a bubble you know, and to think we would continue to spend billions buying euros to support the money, you know, so I think it was right. So the decision was very brutal, you know, very fast, but, to my opinion, it was a good decision. And not a surprise. The surprise was the timing, that's it," Jean-Marc Jacot argued.

If the fine watchmaking industry is not really worried, all eyes turn towards smaller watchmaking firms. After the SNB voiced out its decision, Swiss Brand Watch's top officials talked of "a tsunami", that would ruin Swiss firms' competitiveness.

"All companies have to adapt, but it will be perhaps more difficult for small companies to adapt and to take the measures - either the reduction of their margin, or either the rising of the prices - but it is also a question of competitivity [sic]," said Swiss National Watchmaking Federation's president Jean-Daniel Pasche.